Why is a Classifieds Site for Cars Valued at $300m?

With US$8.3 billion worth of used, idle goods floating around India, there’s a chance that the future might look like a post-apocalyptic junkyard of things we don’t want anymore. If everyone always wants something new, what do we do with the old?

"Sell it off," says the president of Cardekho, Umang Kumar. Cardekho is a classifieds site for new and used cars. For Umang, those who buy used cars are a demographic of their own that need to be uniquely targeted. "If you actually look at the used car market, it’s growing at a rate of 25 percent," he says.

Photo credit: Wikipedia

Cardekho also hosts an active forum, sells car accessories, and provides access to the latest automobile news. It was launched by GirnarSoft which is also the parent company of price comparison site PriceDekho. GirnarSoft raised a total of US$65 million in two rounds from investors like Sequoia Capital and Chinese investment fund Hillhouse Capital. After its latest round of funding, Cardekho is now reported to be valued at a massive US$300 million.

Before this, Umang founded Gaadi, an auto classifieds site that was first sold to Naspers and then acquired by Cardekho last September. "The original idea started when I was working in the media industry," he reminisces. "At that time, I noticed that digitization was severely disrupting the advertisement space. Within this, the biggest things getting disrupted were real estate, education, and automobiles. I decided to tackle the automobile market."

What’s the big difference?

So, let’s say you want to sell your car. Which classifieds site do you choose? Naspers’ OLXis a classifieds marketplace with its presence in over 106 countries. In India, it’s considered one of the country’s largest used goods classifieds sites and has a category specifically for automobiles.

Cartrade, another used automobile classifieds site, is backed by investors like Warburg Pincus and Tiger Global Management who have pumped in US$30.2 million of funding in a single round.

It recently acquired its rival Carwale. Recent entrant Droom is a mobile-first automobile marketplace that’s backed by Lightbox Ventures and Japanese internet firm Beenos. It promises to make buying cars as easy as possible and includes features like a refundable commitment fee of 2 percent so sellers aren’t affected if someone backs out of a deal.

As with all sites that depend on their community, however – Facebook’s original mad rush of users and ensuing success being an important example – the size and enduring loyalty of its original users can mean the difference between success and failure.

In order to gain this loyalty, Umang explainsCardekho has used a very specific strategy."We’ve done a lot to capture our customers," explains Umang. "We like to break it down to three aspects: trust, convenience, and price." The past few years have seen Cardekho use these aspects to pivot from an advertising revenue model to indulging in everything from ecommerce to warranties.

Cardekho’s acquisition trailis long and strategically planned to help achieve this trifecta. It acquired auto portal Zigwheels in September and "intelligent shopping site" BuyingIq – essentially, a vamped up price comparison site that also aggregates reviews and recommendations – in April.

Along with its acquisitions, Cardekho has launched several features to help achieve its goals. The Cardekho "Trustmark" is a stamp of verification for cars that the company has inspected. With the use of a thorough 120-point checklist – including checkups of engines, steering systems, and transmission – cars are either rejected or certified. While the verification process only works in 14 cities across India, those that pass are listed as "Cardekho verified."

Although Cardekho is not the only one to use a verification process on its sellers, the site has a strong focus on quality. As of December 2015, the site has inspected 28,703 cars, but only certified 6,759. "Used car dealers have gotten away with a lot," says Umang.

"There’s this thing called ‘bait and switch’ where a dealer will put up a photo of a good quality car that he sold six months ago. When the buyer travels to buy the car, he’s then met with a low-quality fake. Verified cars also come with a warranty that guarantees long term sustainability. We’re really trying to build an ecosystem here," explains Umang. "Building trust is the first step to getting people interested in a trend."

Photo credit: TexasEagle Used cars salesmen have a bad reputation.

Once a seller lists her car on Cardekho, she is given a few price suggestions. While the suggestions are taken from similar listings, ultimately, sellers can determine the price at which they want to sell. Customers can also use Cardekho’s ecommerce platform in order to purchase accessories for their cars. "We’re really the first of our kind to provide a dedicated platform there," explains Umang. "Ideally, we want to cater to customers throughout the lifecycle of owning their vehicle. This also gives the opportunity to buy a lot of other startups, which is really exciting."

Waiting for a homogenous market

Photo credit: Lingaraj GJ

While Cardekho already has its presence in 25 countries, Umang is focusing closely on Southeast Asia next. "We see that entire area as a huge opportunity for us," he explains. Last July, it launched CarBay in Malaysia and Thailand.

Still, the success of classifieds sites in India is determined by the government’s willingness to cooperate with independent sellers. Currently, cars that are bought in one state require rigorous documentation to be sold to buyers in another state. Within cities, changing registration details is a nightmare. "I believe that the future will see india having a homogenous used car market," says Umang.

"At that point I’d love to tie up with logistics providers to help with shipping. We also want to release a financing arm that will help used car buyers figure out their payments. Eventually, a buyer will be able to get the entire license of the car registered to them just by using our platform – but we’re not there yet."

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